Jim O'Neill: There's One News Development In Europe That's More Important Than The Greek Elections

Greece's failure to form a government and it's June 17 elections are getting all the attention in Europe.

But Jim O'Neill, chairman of Goldman Sachs Asset Management, was on CNBC saying the one European story that isn't getting enough airtime, is the German policy response to the French election.

In the medium to longer-term this is a much more important story than the Greek election. In his Viewpoints he wrote:

"The most interesting aspect of the French election is how German policymakers responded. Suddenly there is a fresh tone of what I would regard as welcome realism and open mindedness. First of all, Finance Minister Schauble talked about the need for higher German wages, which would help rebalancing within the EM. And a few days later, some Bundesbank officials acknowledged that Germany would probably have to accept inflation above 2 pct for some time.

As one of the people I was referring to above put it to me, it would be through “gritted teeth,” but the reality is that they really have no alternative if the EMU is to persist following the shifting ground demanded by European voters. All of this should be good, and it will probably mean that the ECB will be less hawkish as a result."

O'Neill pointed to IG Metall 4.3% percent wage increase over 13 months as a positive development, and added that this out of the blue creative thinking by Germany would help domestic competitiveness.